BofA Securities Reiterates Buy on NVIDIA, $350 PT

BofA Securities analyst Vivek Arya reiterated a Buy rating and $350 price target on NVIDIA (NASDAQ: NVDA).

“We caught up with NVDA senior management earlier today following their latest $105bn OpenAI commitments (details inside).

The strategic intent is clear: NVDA is committed to the transformational nature of AI and to securing every input – chip supply, land, power, shell – especially for disruptive, non-investment-grade customers such as frontier labs and neo-clouds.

Today’s conditions make this worthwhile: solid GPU rental rates, compute scarcity, and NVDA’s industry-leading FCF generation.

It also diversifies NVDA beyond public hyperscalers now building competitive custom chips. The risk: if AI demand slows, both NVDA’s growth rate and balance sheet could come under pressure.

The debate is how to reflect this reward-versus-risk in NVDA’s valuation. We expect NVDA to provide more disclosure around off-B/S commitments on Aug-26 earnings.

Off-balance-sheet risk matters but resists easy valuation; a cleaner lens is sum-of-parts.

We: 1) reward – via a higher multiple – the free cash flow (FCF) returned to common shareholders through buybacks and dividends (FCF_Common, now 50% of FCF), while 2) discounting the remainder (FCF_Invest, the other 50%) presumably servicing customer financing above.

Applying peers’ (AMD/MRVL) ~48x/30x CY27/28E FCF multiple to NVDA’s FCF_Common, and a 50% haircut to FCF_Invest, implies a blended ~36x/22.5x CY27/28 EV/FCF.

Yet NVDA trades at 18x/15x CY27/28 EV/FCF, a 50%/34% discount that could be overstating the risks and creating a compelling opportunity, in our view.”

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